Economic crisis and the need for intelligence
The coronavirus outbreak obviously has a disastrous impact on the world. In the first place it affects the health of people all around the world, but it also has major economic implications. In uncertain economic times like this, the need for intelligence is high. This article tells you all about it.
The state of the economy depends on many different factors. After a time of optimism and prosperity the economy, contracts, stalls and gets into a downturn. Most of the time following 'natural'predictable cycles, like inventory levels, purchasing index, housing market, stock market, confidence and interest rates.
For many companies, an economic downturn means a change in business strategies and tactics, but also on an operational level. Because most companies will be confronted by a decline in revenue and less profit.
If an economic downturn is also facing unexpected uncontrollable events, sometimes called Black Swans (Taleb, 2008), the world may turn into a crisis and the need to drastically change business models and operational models is even more needed. That is what we are seeing today with the Coronavirus. Covid-19 is not under control and is disrupting the global economic activities, getting the world into a serious crisis. (Look at Wall Street, global value and supply chains, crude price, airlines, retail, shops, bars and restaurants etc.)
Intelligence during an economic downtime and crisis
During times of difficult economic situations (like the crisis we have today), intelligence is exceptionally important, and an intelligence professional must be very sharp and focused on doing the right things for the company. This is the moment for an intelligence professional to make the difference and help a company to survive and prepare for the future.
What should an intelligence professional do?
The intelligence portfolio is broad and deep, covering all the aspects of the market, customers, competitors, supply chain, go-to-market, and so on. Also, intelligence can play a role on different levels: strategic, tactical, and operational.
Regardless of the size of an intelligence team, it is very difficult to do it all. An intelligence professional can make the difference, by providing the right insights that are beneficial for the company.
The most important intelligence activities in the current economic situation are the following: In general, the first step is to understand the nature of the crisis. How is the crisis impacting the economy and company, how long will the crisis last, what are the changes? Check the changes and progress of the economy with a high frequency (daily if needed). Link this to a needs analysis. Talk to all key stakeholders to get a clear picture of what is needed from their perspective. However, you must keep the overall objectives of the company in mind. It is a risk to be distracted by the individual needs of the stakeholders.
The common company needs are key. For the vast majority of companies that means: Short term intelligence. Stakeholders must know what will most probably happen in the near future in order to take the right decisions. For many companies, a crisis means a survival strategy. So, long-term intelligence is less relevant at the moment. Studying just the short-term intelligence requires a lot of work. And so, it is recommended to collaborate with the field: salespeople and business developers, but also customers and vendors. They all have information and together you can build a much better and more holistic view than alone.
The most important intelligence activity is customer intelligence
Many people make the mistake that they are more interested in understanding what their competitors are doing, than analyzing the (potential) customers. Let me be clear: customers bring in the business, you want to make sure they remain your customer. In other words, you must know how satisfied and loyal your customers are, why they are buying from you, when and how much. Understand their pain-points and identify how we can help our customers; can we meet their needs? Talk to them, ask questions! Here is a 7-point list containing the most logic and common actions that companies take during an economic downturn or crisis:
What do companies do during an economic downturn or crisis?
- Shift from Capex to Opex. Less investments and more maintenance.
- Cost reduction by cutting overhead, get to lean operations and improve operational efficiency.
- In relation to this is a possible restructuring (with spin-offs or buyouts) and cross train employees to create sustainability and efficience.
- Focus on customers, as it is easier to keep a customer than to find a new one. And losing a customer is even more expensive.
- Finding new markets and business opportunities, but also find/create new income streams.
- They might consider collaboration with other firms, in the form of JV´s, strategic alliances or mergers and acquisitions.
- Optimization of the supply chain, including a change in purchasing terms and conditions.
It is important for a market and competitive intelligence professional to understand that these are the main changes companies are dealing with.
Another aspect of customer intelligence is the usage of propensity and segmentation models to get an idea who else would like to buy your products and services. After that you can further analyze the market to find other and new opportunities, maybe in adjacent markets. This makes sense because key stakeholders may want to create alternative income streams. Another element is the supply chain intelligence. This is more important during crises than when the economy is flying high. Companies that see a decline in profit and revenue will optimize their supply chain. Make it leaner, shorter, cheaper. If you understand this intelligence, you can help your company in minimizing risks and reducing expenses while maintaining the quality of the supply chain.
And then, finally and if you have time left over, watch your competitors. Maybe it is time to buy one of your competitors or merge. That would be nice, but more importantly is to look for new entrants. Start-ups that see a big opportunity in an economic downturn. They have new products/services, business models and go-to-market strategies that are disruptive. They may be found in the platform economy. And these types of disruptive competitors can do more harm than the established incumbents you are used to seeing in the business. Maybe one other reason to keep an eye on your competition is to find out if they do things, you have not thought of (a blind spot). But will you consider going into a copy-cat mode and do the same? It is better to listen to your customers to understand what they want to buy from you. Now and in the future. So, what is it that you need to deliver to keep your customer happily buying from you? That is loyalty. Good Luck!
The last point is about communication: whatever you would like to share with your stakeholders, communicate with sensitivity. It is a crisis, so people are sensitive, and you cannot allow any miscommunication or presenting wrong data with wrong conclusions.
Author: Joost Drieman